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“The design of the new tool will leave maximum discretion to the Governing Council,” said Kristian Toedtmann, an economist at Dekabank. “By being deliberately vague, central bankers hope that on the one hand the sheer existence of such a tool will be enough to avoid turmoil in financial markets, and on the other hand purchases of government bonds aren’t frequent enough to substantiate allegations of monetary financing.” “The ECB will need to set expectations that they’re likely to still hike rates even if the euro area enters a recession in the second half,” they said, as inflation will be “keeping pressure up on the ECB through the autumn.”
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